Stock futures up ahead of Fed

Time Warner sees margins, sales higher in 2004

EmilyChurch

LONDON (CBS.MW) - U.S. stocks were heading for a higher start on Wednesday amid expectations the Federal Reserve will signal later today that it still plans to maintain ultra-low interest rates.

Market tracker stocks came off pre-open peaks, however, after a disappointing durable goods report for December.

Total orders for durable goods were unchanged in December after falling a revised 2.3 percent in November. Economists expected a 2.2 percent gain. Communications equipment orders plunged 18.1 percent to the lowest level in seven years, the Commerce Department said.

Dow industrials futures were up 10points at 10,600, down from a rise to around 10,616; the S&P and Nasdaq futures were also higher. European markets turned higher mid-morning as well.

Time Warner
TWX, +0.72%
lent some early support; the media giant said it expects full-year 2004 percentage growth in operating income, excluding special items, to be in the "high-single digit to low-double digits" vs. $8.8 billion in 2003, due to anticipated higher revenue and margins.

Operating income at each of its divisions except its filmed entertainment unit is expected to grow faster than in 2003. Its AOL division is expected to grow operating income in the "low-double digit" percentage range over 2003's $1.5 billion, it said.

Internet book seller Amazon.com
AMZN, +0.17%
however, remained under pressure. Among the few stocks trading in Frankfurt, Amazon shares had been down over 3 percent at $53.41 - roughly in line with an overnight tumble after gross margins fell below expectations in the latest quarter. The shares were at $54.10 on New York ECNs. See full story.

Vodafone CEO Arun Sarin told reporters "we are watching developments in the U.S." when asked if Vodafone submitted a bid. "Whatever we do or not do will always be with our shareholders in mind." AFX said he declined further comment.

Meanwhile, VOD declined 2 percent after better-than-expected subscriber growth in the December quarter and the ambiguous comments on U.S. acquisitions.

In London, stocks were little changed as the judge heading the inquiry into the death of weapons expert David Kelly said that he was satisfied concluding that Kelly had taken his own life.

The judge, former Northern Ireland Chief Justice Hutton, said he has decided that the question of whether intelligence about Iraq's weapons of mass destruction justified going to war fell outside the scope of his inquiry.

Focus stocks

Procter & Gamble
PG, +1.04%
a Dow component, posted a 22 percent rise in net earnings in the December quarter to $1.82 billion, saying the profits growth as "driven by unit volume growth and manufacturing cost savings, which enabled marketing investments to sustain top line growth."

Looking ahead, P&G sounded some caution, saying "the current consensus estimate is at the top end of net earnings per share expectations for the quarter" for the March quarter.

It added it expects organic volume "in the high single-digits. Foreign exchange is expected to increase sales by two to three percent primarily due to continued strength of the Euro, Canadian dollar and British pound.... Total sales are expected to increase 14 to 18 percent."

Ryanair
RYAAY, -0.54%
shares dropped over 20 percent in London trade after the airline warned profits could contract in the March-ending year by as much as 10 percent because of the pressure on yields. Its bleak outlook for yields, or revenue from average fares, impacted shares of its chief rival in discount flights, EasyJet (EZJ), which eased 5 percent. See more

New York-listed Ryanair stocks - which at times have traded at a premium to the London shares because of the North American demand - were down 20.9 percent at $39.

Broadcom
BRCM
surged close to 13.2 percent to $45.94 after it reported overnight a fourth-quarter profit as sales of its communications chips accelerated. See full story.

Electronic Arts
ERTS
was another mover on its overnight news; shares were down 5.2 percent at $46.

Electronics contract manufacturer Flextronics
FLEX, -0.54%
rose 9.6 percent to $18.71 after topping expectations for the quarter.. reported third-quarter income of $21.4 million, or 4 cents a share. See full story.

LaBranche & Co.
LAB, -4.12%
the NYSE specialist, said fourth quarter revenue dropped 38 percent to $70.9 million from $113.8 million a year ago as it swung to a net loss of $156.9 million, or $2.62 per share on a charge.

NetBank
NTBK
reported fourth-quarter net income of $10 million, or 21 cents a share, down from 25 cents a share in the year-earlier period, amid "significant" declines in conforming mortgage volume and income margins, which resulted from a "sharp downturn" in refinancings.

The Internet-based financial services firm also warned that the current range of analyst forecasts for first-quarter earnings "may be high," as its mortgage business is likely to weaken due to lower production volumes and further declines in margins.

Broker Calls

Merrill Lynch raised its rating on Serono
SRA, +11.11%
the European biotech group, to buy from neutral. "We expect Serono to meet or beat its outlook" of profits and sales growth in 2003," the broker said. "Serono is an obvious play to benefit from a rally in the U.S. sector." Serono is slated to report Feb. 2.

J.P. Morgan Securities raised its rating on Scotts Co.
SMG, -0.89%
to an overweight from neutral. "We continue to think Scotts is well-positioned to gain share in the high growth U.S. lawn and garden category."

Mixed comment surfaced on Network Associates
NET, -10.53%
Credit Suisse First Boston raised its rating on NET to outperform, saying it believes "the consumer A/V business is positioned for strong growth, given the active virus environment (specifically Mydoom), and that Sniffer has finally stabilized."

Banc of America Securities also raised its rating on NET to buy overnight. SG Cowen sounded a cautious note. "Trouble in SMB, a top fix priority and market share issues in enterprise still leave doubts," the broker said. "IntruVert (is) a bright spot but still too small to help - Sniffer possibly for sale would mean even more reliance on heavily contested AV market. All in, leaves us on the sidelines."

NET was up 8.6 percent on Instinet at $17.50.

Elsewhere, Morgan Stanley commented on the Sprint Corp.
FON, +0.00%
realignment of its business model. "With this decision, we also expect the company will soon announce the recombination of the FON and PCS tracking stocks."

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